QuestionWhat was the association of Medicare’s recent change to the Hospital Readmissions Reduction Program, in which hospitals are judged within 5 peer groups based on the proportion of their patients who are dually enrolled in Medicare and Medicaid, with changes in performance and penalties after stratification?

FindingsIn this cross-sectional study, hospitals in the lowest quintile of dual enrollment saw an increase of $12.3 million in penalties, while those in the highest quintile of dual enrollment saw a decrease of $22.4 million. Large hospitals, teaching hospitals, hospitals in the most disadvantaged neighborhoods, and those with the highest proportion of beneficiaries with disabilities were markedly more likely to see a reduction in penalties, as were hospitals in states with higher Medicaid eligibility cutoffs.

MeaningStratification of hospitals by the Hospital Readmissions Reduction Program was associated with a significant shift in hospital penalties for excess readmissions.

Abstract

ImportanceBeginning in fiscal year 2019, Medicare’s Hospital Readmissions Reduction Program (HRRP) stratifies hospitals into 5 peer groups based on the proportion of each hospital’s patient population that is dually enrolled in Medicare and Medicaid. The effect of this policy change is largely unknown.

ObjectiveTo identify hospital and state characteristics associated with changes in HRRP-related performance and penalties after stratification.

Design, Setting, and ParticipantsA cross-sectional analysis was performed of all 3049 hospitals participating in the HRRP in fiscal years 2018 and 2019, using publicly available data on hospital penalties, merged with information on hospital characteristics and state Medicaid eligibility cutoffs.

ExposuresThe HRRP, under the 2018 traditional method and the 2019 stratification method.

Main Outcomes and MeasuresPerformance on readmissions, as measured by the excess readmissions ratio, and penalties under the HRRP both in relative percentage change and in absolute dollars.

ResultsThe study sample included 3049 hospitals. The mean proportion of dually enrolled beneficiaries ranged from 9.5% in the lowest quintile to 44.7% in the highest quintile. At the hospital level, changes in penalties ranged from an increase of $225 000 to a decrease of more than $436 000 after stratification. In total, hospitals in the lowest quintile of dual enrollment saw an increase of $12 330 157 in penalties, while those in the highest quintile of dual enrollment saw a decrease of $22 445 644. Teaching hospitals (odds ratio [OR], 2.13; 95% CI, 1.76-2.57; P < .001) and large hospitals (OR, 1.51; 95% CI, 1.22-1.86; P < .001) had higher odds of receiving a reduced penalty. Not-for-profit hospitals (OR, 0.64; 95% CI, 0.52-0.80; P < .001) were less likely to have a penalty reduction than for-profit hospitals, and hospitals in the Midwest (OR, 0.44; 95% CI, 0.34-0.57; P < .001) and South (OR, 0.42; 95% CI, 0.30-0.57; P < .001) were less likely to do so than hospitals in the Northeast. Hospitals with patients from the most disadvantaged neighborhoods (OR, 2.62; 95% CI, 2.03-3.38; P < .001) and those with the highest proportion of beneficiaries with disabilities (OR, 3.12; 95% CI, 2.50-3.90; P < .001) were markedly more likely to see a reduction in penalties, as were hospitals in states with the highest Medicaid eligibility cutoffs (OR, 1.79; 95% CI, 1.50-2.14; P < .001).

Conclusions and RelevanceStratification of the hospitals under the HRRP was associated with a significant shift in penalties for excess readmissions. Policymakers should monitor the association of this change with readmission rates as well as hospital financial performance as the policy is fully implemented.